Chris Pestell, Investment Director of Mercia SME Loans explains how to avoid the most common mistakes that companies make when applying for a business loan. As an investment director and former banker who has spent over 30 years liaising with companies seeking loans, Chris said it never failed to surprise him how many applications fall short of the mark. Here he sets out his top tips to help you when you are applying for a business loan.


  1. Think like a funder

Most entrepreneurs are passionate about their business and love talking about their line of work. While they may have developed a good grasp of finance, it’s usually a secondary skill and they are less confident in dealing with figures and forecasts.

By contrast, the figures are the focal point for investors. Of course, they will want to know all about the business, and most have a genuine interest in helping you grow, however, the first questions that will spring to their mind are: Is the company making money? What do the figures look like? In many cases when funders open your business plan, they will turn straight to the back to read the financials first.

It is useful to understand this difference in mindset when you are dealing with funders. Another consideration is that the person you are dealing with is unlikely to make a decision in isolation – no matter how much he or she believes in your business, their recommendation will have to be approved by a credit team, and they will need the facts and figures to back your case. If you can provide all the right information in the right format first time round, it makes it easier for them to put together their own report to the credit team and thus increases the chance of approval.


  1. Get professional help with figures

Given the difference in approach between business owners and funders, it is not surprising that the financial section of the business plan is where most problems arise. Businesses find it easier to explain their products and services and their modus operandi rather than produce financial data. Often, they don’t understand what type of figures they are expected to produce, and they don’t always employ the right people to help them.  This is mainly because they don’t see the value in getting this type of help.

Financial forecasting is a specialist area and is distinct from historical accounting. There is a real skill to producing a robust financial model that can be flexed according to the key performance indicators of your business.  A funder will want to know what would happen if the assumptions that have been made don’t work out as planned, so a well-constructed financial model which a funder can amend is extremely valuable.  It is well worthwhile using an adviser who has particular experience in this area – don’t assume that your current adviser is up to the task.


  1. Present figures in the right format

Given that the funder will want to be able to flex your forecasts and carry out sensitivity scenarios, submit them in a program such as Excel that allows this, rather than a ‘fixed’ format such as a pdf.

In addition to a cashflow forecast, an investor will also want to see a funds flow forecast. Both contain similar information, but are presented in a different way with the latter showing movements in working capital which helps to confirm that the business can afford to service the debt.

It’s also a good idea to include the key financial figures in a box in the introduction to the business plan. This will help to satisfy the fund manager’s curiosity and ensure their initial questions are answered at the start!


  1. Don’t try to cover up problems

One of the main reasons companies fail to provide the right information is that the figures highlight problems in certain areas of the business. This situation poses a real dilemma – do you leave out the offending set of figures and hope the funder won’t notice or include them and blemish your track record?

An investor will expect you to have some areas of weakness – in fact, I have never seen a company that doesn’t have some issues, so a too perfect set of figures may in itself arouse suspicions.

My advice would be, don’t try to cover up such problems but instead present them along with a plan on how you are going to mitigate them. This approach will help you build trust with funders from the start.


  1. Keep forecasts realistic

Every time I see a ‘J curve’ in the forecasts I wonder how the company is going to achieve it. Some companies believe they can change the world – but while setting high targets is fine for internal purposes, in your business plan projections it’s best to be realistic or a funder may regard them as unobtainable.

A funder will always look at historic patterns to determine how realistic forecasts are, so if you are forecasting significant growth and haven’t achieved this historically, you need to have some cast iron reasons as to why this will happen.


  1. Be honest about management skills gaps

From the business plans I review you might think that every company in the UK has a very strong management team – yet clearly that’s not true. After the financial section, it is the information on the management where most omissions occur.

Often business owners themselves do not want to acknowledge, or are not aware of, their own limitations. Again, it is better to be open and objective about gaps in management skills or experience and state how you will overcome these, perhaps through training or recruitment. An open approach, accepting of areas of weakness, will command far more respect from a funder.


  1. Don’t forget the competition

While the company information is generally the strongest section in all business plans, competitor information is just as important. Ensure that you identify them, assess their strengths and weaknesses and how their position compares to your own. This information will be checked during the due diligence process but it’s best to include it and give your own view from the start.

By following these seven guidelines you will make it easier for the lender to approve your application and give yourself the best chance of success. If you would like to apply for a business loan from Mercia then please fill out this application form.

Mercia Asset Management PLC (AIM: MERC), the proactive, regionally focused specialist asset manager, is pleased to announce its preliminary results for the year ended 31 March 2020.


Profitable trading achieved ahead of plan, driven by AuM growth


Financial results

  • Assets under management increased by 58% to c.£800million (2019: c.£507million)
  • Revenue increased 19.4% to £12.7million (2019: £10.7million)
  • Net revenues £0.1million (2019: £1.4million net expenses)
  • Net fair value decrease of £15.8million – near term COVID-19 impact (2019: £3.9million increase)
  • Operating loss before exceptional items £17.1million (2019: £2.0million profit)
  • Loss after tax for the financial year £17.5million (2019: £2.6million profit)
  • Loss per share 5.11 pence (2019: 0.86 pence earnings)
  • Unrestricted cash and short-term liquidity investments £30.2million (2019: £29.8million)
  • Net assets £141.5million (2019: £126.1million)
  • Net assets per share 32.1 pence (2019: 41.6 pence)


Managed fund developments

  • Third-party funds under management (“FuM”) increased to c.£658million (2019: c.£381million) contributing £11.7million in revenue
  • FuM increase largely reflects the acquisition of NVM VCT fund management business that added c.£250million in managed funds
  • Venture FuM c.£476million (2019: c.£224million)
  • Private equity FuM c.£60million (2019: c.£61million)
  • Debt FuM c.£122million (2019: c.£96million)

Direct investment portfolio developments

  • £17.5million gross invested into 18 portfolio companies during the year including one new direct investment, One Touch Apps t/a Clear Review
  • Direct investment portfolio £87.5million (2019: £87.7million)
  • Notwithstanding COVID-19 impact, continuing underlying commercial progress made by a number of portfolio companies including nDreams, which continues to be the Group’s largest direct investment

COVID-19 update

  • Priority of the Group continues to be the safety and wellbeing of all employees, with the business transitioning successfully to remote working without any adverse operational impact
  • All portfolio companies risk assessed and tailored support provided where deemed appropriate, with a focus on maintaining long term value potential
  • Unrestricted liquidity of c.£290million to invest across FuM portfolios in addition to £30.2million of balance sheet unrestricted cash and short-term liquidity investments

Post year end FuM progress

  • £38.2million in new capital raised by NVM VCTs
  • Additional £54.3million allocation by British Business Bank from Northern Powerhouse Investment Fund (“NPIF”) to existing Mercia managed mandates
  • Group accredited to deliver its NPIF debt mandate under the Coronavirus Business Interruption Loan Scheme (“CBILS”)

Post year end direct investment progress

  • Successful sale of The Native Antigen Company anticipated to realise an 8.4x return and a 65% IRR
  • 11 Future Fund applications, significantly increasing the liquidity of the companies within the direct investment portfolio, alongside continued focus on expanding our co-investor base
  • New direct investment, MIP Diagnostics, which is developing a highly scalable synthetic antibody platform technology

Mark Payton, Chief Executive Officer of Mercia, commented:

“I am pleased to say that, in many ways, 2019 was a year of significant progress for Mercia as we achieved our goal of trading profitably a year earlier than planned, and significantly increased the scale of our fund management business, both key parts of our three-year strategic plan. A significant driver of this was the acquisition of the three Northern VCT fund management contracts, which helped increase our assets under management (“AuM”) by c.58% to c.£800million, alongside bringing additional recurring revenues and a talented VCT investment team.

“Inevitably, the impact of the COVID-19 pandemic, and the near-term domestic and global economic shock, has negatively affected the holding values of a number of our investee companies, especially within certain sectors such as engineering. Notwithstanding the current reduction in asset price linked fund management revenues, Mercia has begun the new financial year trading profitably, which we expect to continue. During the COVID-19 pandemic, our focus continues to be on the health and safety of our people and ensuring our investee companies have robust cash positions. I am proud of the way we have responded as a business, which has enabled our investment teams to focus fully on supporting our portfolio. We also remain confident in the long-term potential of our direct investment portfolio, which has relatively modest capital needs. We expect the value of this maturing portfolio to accelerate post the COVID-19 pandemic.

“Looking ahead, I believe that Mercia is well placed to build on 2019’s strategic progress and position as a leading and trusted provider of regional capital. The growth of our fund management business means we have over £290million of available liquidity which, in addition to the c.£30million of liquidity on our balance sheet, gives us considerable investment capacity to support both our existing portfolio and take advantage of new opportunities at anticipated lower entry prices.”

Analyst briefing

Due to restrictions resulting from COVID-19, a meeting for analysts will be held virtually at 9.30am today, 14 July 2020. Analysts wishing to attend this event can register via email at An audio webcast of this briefing will subsequently be available later in the day via Mercia’s web site.

Mercia’s 2020 preliminary results and a copy of the analyst presentation will also be available today on the Group’s website under the IR section accessible here.


Here at Mercia, we’re never short of experienced colleagues, from investment directors to CEOs, entrepreneurs and inventors, who have words of wisdom to impart and stories to tell.

So what better way to kick off Spotlight, the newest section of the website that allows you to get up close and personal with the Mercia family, than by picking the brains of one of our youngest team members, University of Cambridge graduate Joshua Levy.

24 year-old Josh has been at Mercia for almost two years, during which time he has gone from a graduate placement to full-time employment, whilst also studying for a professional CIMA (Chartered Institute of Management Accountants) certificate.

Here, Josh reflects on his experiences outside the lecture halls, with musings on everything from the greying hair of colleagues, to why Sunday is the new Monday.

First things first – what brings you to Mercia?

I will have been at Mercia for two years this October, and what an experience it’s been! First off, I feel as though I’ve been very lucky – Venture Capital isn’t an industry that is particularly accessible to young people.

I joined Mercia as an intern straight out of university, where I studied Land Economy before switching to Management in my final year. I found Mercia via the New Entrepreneurs Foundation, a graduate scheme that aims to provide young people with work placements at fast growing, dynamic companies, a description that Mercia definitely fits. When I started, Mercia had £20m under-management and seven full-time members of staff. It now has over £100m, and we number close to 20.

From the very beginning, I was given a lot of responsibility, and expected to carry myself forward and actively bring ideas to the table. From basic admin jobs and assisting the internal team, to shadowing the investment directors and helping out at a few of our portfolio companies, I was certainly kept very busy, but I was always encouraged to get out there and find my own businesses as well. DAB Gaming, the developer and operator of Social (Freemium) and Real Money gambling games, was one of my very first discoveries.

The trick is to work hard and prove yourself during the early months to make your mark. I did, and our CEO Mark Payton signed me on as a full-time investment manager once my placement was up. I haven’t looked back since.

Two years on, I’ve learned an incredible amount so far, ranging from structuring investment transactions, to all the work that goes into floating a business. I also sit on the Boards of several investee companies, including Kwanji, Love Me Beauty and Intelligent Positioning and, whilst I haven’t yet found my specific area of expertise like the investment directors – or “Grey Hairs” as I like to call them! – I am slowly finding my feet within the digital side of our portfolio.

What makes Mercia so unique?

Besides Mercia’s investment strategy from the seed round right through to Series A, I think Mercia has a pretty unique culture that pervades the whole organisation. Everyone gets stuck in, making it a proactive, collaborative working atmosphere. There are no politics or hierarchies, and very little red tape. This means that if I want to speak to our CEO, I can approach him directly. Everyone’s opinion is valid, from the most experienced member of our investment team, to the graduates, which I think is a very healthy atmosphere to have in any organisation.

There are also no rivals or factions, and each investment proposal is discussed amongst the whole team in lively and productive meetings. All of this is even more surprising when you consider the geographical spread of the investment directors, with some ranging from Weymouth right up to Leeds.

Who are you working with at the moment and why are they so exciting?

I’m really excited about a recent investment we have made into wayve, an ad-tech start-up that provides a 360° advertising technology platform. The founder, Jamie, is that great mix of technologist and sector expert that you’re always on the lookout for as an investor. Advertising technology is such a fast-moving space, but in less than two years wayve has managed to build a product used by the like of The Financial Times, Bloomberg and Havas Media. I’m looking forward to seeing how the company develops over the next few years.

Earlier this year, we also invested in Intelligent Positioning, a big data and natural search company that has built a sophisticated piece of analytics software. It’s one of the largest investments I’ve worked on personally, and the company is one of the most developed in our portfolio. They already have plans for expansion into the US and Asia, a project that I know they will be able to succeed in, and I’m delighted that Mercia is able to join them on their journey.

What does the future hold for digital?

Whether you believe that software is eating the world, like Marc Andreessen, or you believe that we’ll soon have evolved into bionic androids living in a world enabled by artificial intelligence, like Ray Kurzwell, one thing is indisputable – technological change is inevitable.

Personally, I think the scope of this change is near impossible to predict. Who would have guessed even two decades ago that we would be able to hold the entirety of human knowledge in a little machine in our pockets? Someone does need to sort out my battery life though – I’m still waiting for an entrepreneur to walk into the office and start talking to me about ambient charging!

Having said that, one thing that I do think will (and must) get increased attention in the coming years is the negative effects of rapid change. When working in venture capital, it is easy to have a relatively narrow view about the benefits of innovation. After all, automation makes things faster, more reliable and more efficient, therefore anyone who complains about technology is clearly a conservative or a Luddite!

I think this view of the world is too simplistic, and glosses over a lot of key debates that we will need to have as a society in order to accommodate this change. Ethics, morality and accepted practices will need to be analysed and developed carefully, but also quickly, to cope with the accelerating rate of change, in partnership between government, business and civil society. What happened in Paris with Uber only a few months ago is a case in point.

What do you look for in a tech start-up?

The main quality I look for is a great team with a competitve advantage and plenty of tenacity. A strong team will have members who counterbalance and complement each other. Ideally, they will also have some special ingredient that enables them to do what they’re doing better than any competitor.

As we invest at the seed stage, we know that there are only two certainties:

  1. That the market will change and;
  2. That the direction of that change will be unpredictable.

Tenacity ensures that management can cope with this change and that they are capable of adapting in order to continue growing, even if that growth is not in a way that was initially forecast in the business plan.

What makes a good business pitch?

A coherent and engaging narrative. Entrepreneurs should be storytellers, so effective communication is vital.

Out of the office, what do you like to do in your downtime?

For me, there’s nothing better than spending time with friends, reading, cooking, eating and going to the gym. I’m a firm believer that a healthy mind and body helps you to perform better in your work.

Also, I’ll admit that I do like to bring an element of work into my downtime. A colleague of mine – Rob Johnson, Mercia’s Head of Electronics and IoT – coined a nice phrase when he said that, at Mercia: “Sunday is the new Monday”!

Is there a technology that you would like to see on the market?

I want to be able to split myself in two. There are just never enough hours in the day to get everything done, but if there were two of me I could double my efficiency!

I know that my boss, Mercia’s CEO Mark Payton, has found a solution to this by sacrificing sleep, but I’m not sure I’m completely up for that just yet!

If you would like to pitch your technology start-up to Josh, you can send an email to